Is Europe Heading for a Meltdown?
THE TELEGRAPH: This financial crisis is worse than the sub-prime crash of 2008 because the sums are so much bigger and it is governments that are in dire straits. Edmund Conway explains the dangers.

Mervyn King, the Bank of England Governor, summed it up best: "Dealing with a banking crisis was difficult enough," he said the other week, "but at least there were public-sector balance sheets on to which the problems could be moved. Once you move into sovereign debt, there is no answer; there's no backstop."

In other words, were this a computer game, the politicians would be down to their last life. Any mistake now and it really is Game Over. Or to pick a slightly more traditional game, it is rather like a session of pass-the-parcel which is fast approaching the end of the line.

The European financial crisis may look and smell rather different to the American banking crisis of a couple of years ago, but strip away the details – the breakdown of the euro, the crumbling of the Spanish banking system to take just two – and what you are left with is the next leg of a global financial crisis. Politicians temporarily "solved" the sub-prime crisis of 2007 and 2008 by nationalising billions of pounds' worth of bank debt. While this helped reinject a little confidence into markets, the real upshot was merely to transfer that debt on to public-sector balance sheets.

This kind of card-shuffle trick has a long-established pedigree: after the dotcom bust, Alan Greenspan slashed US interest rates to (then) unprecedented lows, which helped dull the pain, but only at the cost of generating the housing bubble that fed sub-prime. It is not so different to the Ponzi scheme carried out by Bernard Madoff, except that unlike his hedge fund fraud, this one is being carried out in full public view.

The problem is that this has to stop somewhere, and that gasping noise over the past couple of weeks is the sound of millions of investors realising, all at once, that the music might have stopped. Having leapt back into the market in 2009 and fuelled the biggest stock-market leap since the recovery from the Wall Street Crash in the early 1930s, investors have suddenly deserted. London's FTSE 100 has lost 15 per cent of its value in little more than a month. The mayhem on European bourses is even worse, while on Wall Street the Dow Jones teeters on the brink of the talismanic 10,000 level.

Whatever yardstick you care to choose – share-price moves, the rates at which banks lend to each other, measures of volatility – we are now in a similar position to 2008. >>> Edmund Conway | Thursday, May 27, 2010

‘Mummy’ Merkel Battered as Germans Lose Faith in EU
THE SUNDAY TIMES: After bailing out Greece and now the euro, Germany is fed up with being Europe’s paymaster

Germans are proud of working for global brand names such as manufacturing firms such as Mercedes-Benz and are outraged that Angela Merkel is giving taxpayers’ money to a country with little industrial output. Photo: The Sunday Times
GISELA and Susi, thirtysomething civil service secretaries, were shivering over their sausages in what the tabloids labelled the “most miserable May of the millennium” and planning their summer holidays. “I know where I’m not going,” one of them said. “The hotels, service and food aren’t as good as Turkey but the prices are as high as Italy!”

As Berliners bravely sat on the banks of the River Spree in unseasonably cold weather for the Ascension Day holiday that traditionally marks the start of summer, they had no doubt that the cold wind was blowing from the sunny south: Greece in particular.

The multi-billion-euro payout for Greece, followed by an even more expensive rescue package for the threatened single currency, has created the greatest political climate change in a generation.

Suddenly Germans are asking questions about the European project that has been the bedrock of their politics for 60 years, leaving Angela Merkel, the chancellor, under fire from the electorate, the opposition and her own party.

It took a stand-up display of table-banging aggression from President Nicolas Sarkozy and an intervention on the telephone from President Barack Obama to get Merkel to agree to the euro package.

“We foot the bill for EU disaster,” screamed a headline in Bild, the tabloid newspaper. Christoph Schmidt, a government economist, responded by warning: “Germany cannot become Europe’s paymaster.”

The tension between Germany and France threatened to spill over at a Brussels summit last weekend when Merkel and Sarkozy had a furious row. According to observers, it ended with Sarkozy threatening to leave the euro.

“It was a stand-up argument,” an official told El Pais, the Spanish newspaper. Sarkozy, furious at Merkel’s reluctance to sign up to a safety net of €750 billion (£644 billion), was shouting and bawling at Merkel and smashed his fist on the table. “It was Sarkozy on steroids,” one witness said.

Dubbed “our Iron Lady” — or just “Mutti” (Mummy) within the Christian Democratic Union (CDU) that she dominates — Merkel returned to Germany accused of having given too much, too late.

Her timing was also poor. The euro talks, combined with the Greek bailout, led to a CDU defeat in North Rhine-Westphalia’s state election last weekend and with it the loss of her majority in the upper house. >>> Peter Millar in Berlin | Sunday, May 16, 2010

THE SUNDAY TELEGRAPH: Germans Turn Against the EU as Eurozone Meltdown Heaps Misery on Angela Merkel >>> Andrew Gilligan in Bielefeld, Westphalia | Sunday, May 16, 2010

Germans Turn Against the EU as Eurozone Meltdown Heaps Misery on Angela Merkel
THE SUNDAY TELEGRAPH: German fury at paying for Greek extravagence is turning into anger against the European Union, the euro, and Angela Merkel, writes Andrew Gilligan in Westphalia.

Unlike the lily-livered British red-tops, the main German tabloid, Bild Zeitung, puts nipples on the front page. Day after day for the past week, it has been metaphorically stripping naked the same victim, then pouring cold baked beans over her head. Once-divorced mother-of-none Angela Merkel, 55, from Berlin, a chancellor of Germany, has had probably the worst seven days of her life.

To imagine the full scale of Mrs Merkel's disaster, think of it as a bit like that moment in 2008 when Britain suddenly had to find £46 billion of public money to bail out the banks, overnight storing up years of spending cuts, tax rises and general misery for everyone else. Then multiply the amount of money potentially required, and the amount of pain which could be inflicted, by three.

Mix in the fact that the people the German government has had to rescue aren't even Germans, but Greeks. Add that the deal was done only after the repeated prodding by Mrs Merkel's great European rival, French President Nicolas Sarkozy, who reportedly threatened to pull out of the euro. Then there was the problem that as all this was unfolding, Mrs Merkel had to face a vital election.

And top off with the slowly-dawning, horrified realisation by the taxpayers of Germany that late last Sunday night, their Chancellor signed them up for potentially even bigger, indeed unlimited, bailouts of everyone else in the single currency, too.

"We are again the idiots of Europe!" shrieked Bild, which has the power of the Daily Mail, The Sun, and the Daily Mirror added together, and whose official slogan can be broadly translated as "We think up your opinions so you don't have to." Even before Sunday night, things had been going downhill for the world's most powerful woman. Last Saturday, Mrs Merkel held an open-air rally in the industrial city of Bielefeld. Intended to rouse her party supporters on the eve of the crucial poll, it turned into something of a rout. >>> Andrew Gilligan in Bielefeld, Westphalia | Sunday, May 16, 2010